Case S31
Judges: HP Stevens ChTJ McCarthy M
PM Roach M
Court:
No. 1 Board of Review
P.M. Roach (Member)
In this reference the taxpayer, a husband, claims a ``spouse rebate'' in the sum of $562 pursuant to sec. 159J of the Income Tax Assessment Act (``the Act'') in relation to that part of the year of income ended 30 June 1983 commencing on 1 December 1982, the date of birth of the taxpayer's first child. The taxpayer's spouse, mother of the child, had been in paid employment up to and including 30 November 1982. From 1 December 1982 the taxpayer claimed to have wholly provided for the maintenance of his wife and his son, except to the extent to which his wife may have drawn on her own savings. I find that throughout the year of income both spouses resided in Australia (cf. sec. 159H) and had resided together (cf. sec. 159J(5)).
2. The taxpayer and his wife married in May 1980, prior to which date they had lived together as if man and wife, but without assuming the mutual responsibilities arising from a public commitment to a lawful marriage. They had both been employed and had resided together in a flat owned only by the taxpayer. When that flat was sold the net proceeds of sale together with other moneys borrowed jointly were applied in the purchase of a new home in their joint names. The taxpayer accepted that thereby he had ``gifted'' one-half of the equity in his former home to his wife, and I accept that.
3. Some time later, and it may have been but a period of three or four months, the couple sat down with a view to determining the quantum of their joint expenses and with a view to apportioning them so that neither would be a financial burden on the other. They assessed a figure of just under $1,400 per month (although house and contents insurance were overlooked) and thereafter, until she ceased employment, the wife paid the husband $700 per month from her earnings, thereby assuming that her share was in all respects as great as that of the taxpayer. Some obligations, such as interest, were discharged in arrears and others, such as car insurance, were met in advance. Contributions by the wife were usually made during the month to which they related but on occasion were made slightly in arrears. The figure so determined was never adjusted or revised, either upwards to take into account inflation, rates, etc., or downwards, either because of an overestimate of any class of expenditure or because the wife, either alone or principally, bore some expenses, such as petrol, in addition to her monthly contribution of $700. (Despite the fact that ``car expenses'' were treated in the calculation as joint expenses, the wife in fact paid the bulk of petrol expenses.) The evidence of each was, and I accept it, that the wife wanted to know in advance what amount she would be called on to pay towards their joint expenses so that she could operate to a predictable pattern and at the same time know how much of her earnings remained available to her for her own purposes
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be they the costs of personal grooming and attire or the expenses of a contemplated overseas journey. She believed, and I accept it, that she had paid her full share of their joint expenses. (I am of the view that the circumstance that she made a contribution over and above $700 per month to the totality of her own maintenance does not invoke the operation of sec. 159J(3)(b). After all sec. 159J(4) allows that the rebate may be wholly allowable even though the dependant spouse has a separate net income of $282; and may be allowable in part even though the separate net income of the dependant spouse is not more than $4,133.)4. Subsection (5) of sec. 159J introduces a deeming provision into the scheme of the legislation. It provides that while husband and wife reside together and each has a separate net income, each is deemed to be contributing to the maintenance of the other. It also recognises that notwithstanding that spouses are residing together and that each has a separate net income, neither may be contributing to the maintenance of the other. (In practical terms that may be narrowed to the proposition that the spouse with the greater separate net income is not contributing to the maintenance of the other.) Prima facie the subsection operates two ways, in that, first, it deems that a taxpayer cohabiting with his (or her) spouse who has a separate net income contributes to the maintenance of the spouse whether he (or she) does so contribute or not, but, secondly, it casts on the taxpayer who cohabits with a spouse who has a separate net income and who does not contribute to the maintenance of that spouse the responsibility of proving that he (or she as the case may be) did not contribute to the maintenance of the spouse.
5. Now the concept of ``maintenance'' is not defined by the Act. In my view it is to be accorded its common law meaning, well expressed by
Mayo
J. in
Kallin
v.
Kallin
(1944) S.A.S.R. 73
, as ``the act of maintaining, and denotes the regular supply of food, clothing and lodging; the provision of the necessaries and the conveniences of life''. Further, it is a question to be resolved in a practical manner. In my view a spouse does not cease to be self-supporting by reason only of the circumstance that her husband occasionally wines and dines her at his own expense; or because relatives confer occasional gifts; or that others from time to time extend hospitality to the spouse. Whether upon the evidence before us ``the contrary (referred to in subsec. (5)) has been established'' is a question of fact to be determined on the balance of probabilities. That is not an onerous burden. It is simply a question of fact such as traditionally would have been left for a jury to determine, as ``twelve good (taxpayers) and true''. Further, in making that finding, it is proper to have regard to the nature of the issue. Parliament has recognised that a husband and wife may cohabit and yet at the same time each of them maintains himself (or herself) independently of the other. In order to establish that that condition of financial independence exists in my view does not require that such meticulous and detailed records be maintained or that each contributed in due proportion (50% or more or less according to the nature of the item and the benefit taken) as would enable the cost of benefits and the contributions to their cost to be precisely established in later years. Such a requirement would be likely to place the marriage itself at risk. I adopt respectfully the approach of Mr R.E. O'Neill in another context when (in
(1967) 17 T.B.R.D.
Case
S67) he said (at p. 394):
``In my opinion such an approach is too narrow and unrealistic to be adopted. Analysis of that kind `is an analysis which, like the dissection of a living thing, may destroy reality in professing to exhibit it'.''
In my view it should be held as a matter of fact that the taxpayer has established ``the contrary'' as required by subsec. (5), and I so hold, notwithstanding the logical possibility that the wife's share of joint expenses may have grown to exceed $700 per month during the period in question. But, be that is it may, I do not consider that that is the essence of the issue before us upon this reference.
6. Subdivision A of Div. 17 introduced a system of concessional rebates to replace deductions formerly allowable in relation to the support of dependants and others. Having by sec. 159H provided (inter alia) that the Subdivision only applied if the taxpayer is a resident (as I find the taxpayer was at all material times) and not a company (and I so find - one wonders whether the draftsman was concerned to ensure that ``parent companies'' so-called could not benefit under the Subdivision), then sec. 159J as originally
ATC 289
enacted, and so far as is material, provided as follows;``(1) Where, during the year of income, a taxpayer contributes to the maintenance of a person (in this section referred to as a `dependant') specified in column 2 of the table set out in sub-section (2) and that person is a resident, the taxpayer is entitled, in his assessment in respect of income of that year of income, to a rebate of tax ascertained in accordance with this section.
(2) Subject to this section, the amount of the rebate allowable in the assessment of the taxpayer in respect of a dependant under this section is the relevant amount specified in column 3 of the following table: -
Column 1 Column 2 Column 3 Class Dependant Amounts of Rebate 1 Spouse of the taxpayer $400 2 . . . 3 Child less than 16 years of age In respect of 1 such child - $200 (not being a student) In respect of each other such child - $150 4 . . . 5 . . . 6 . . .(3) Where -
- (a) the taxpayer contributes to the maintenance of a dependant during part only of the year of income;
- (b) during the whole or part of the year of income, 2 or more persons contribute to the maintenance of a person who is a dependant in relation to 1 or more of the persons so contributing;
- (c) a dependant, being the spouse of the taxpayer, is married to the taxpayer during part only of the year of income;
- (d)...
- (e)...
the rebate allowable to the taxpayer in respect of that dependant shall be such part of the relevant amount specified in column 3 of that table as, in the opinion of the Commissioner, is reasonable in the circumstances.
(4) The amount of the rebate otherwise allowable under this section in respect of a dependant shall be reduced by $1 for every $4 by which the separate net income derived by the dependant in the year of income exceeds $150.
(5) Where, during the whole or a part of the year of income, the taxpayer and a person of a kind specified in column 2 of the table in sub-section (2) resided together and that person has a separate net income in that year, then, for the purposes of this section, the taxpayer shall be regarded, unless the contrary is established to the satisfaction of the Commissioner, as having contributed to the maintenance of that person during the whole or that part of the year of income, as the case may be.
(6) [Sets forth definitions of (inter alia) separate net income.]''
Section 6 of the Act provided that:
``In this Act, unless the contrary intention appears -
- `year of income' means -
- (a) in relation to a company...; and
- (b) in relation to any other person - the financial year for which income tax is levied, or...''
7. Subsequently sec. 159J was amended. As a result for the year ended 30 June 1983 subsec. (1) was amended to require the dependant to be a resident (as I find the taxpayer's spouse was); subsec. (1A) and (1B) were inserted with the effect of deleting the rebate for children under 16 but increasing the rebate in relation to a spouse with one or more children under the age of 16 to $963; subsec. (3) was extended to embrace persons resident during part only of
ATC 290
the year of income; subsec. (3A) was added touching the definition of ``resident''; subsec. (4) was amended to substitute $282 for $150; and the definitions of ``invalid relative'' and ``separate net income'' in subsec. (6) were amended. None of those amendments other than that to subsec. (4) has any relevance to any of the matters in issue before us.8. In the course of argument I suggested to the Commissioner's representative that the circumstance that in the year of income ended 30 June 1983 the taxpayer's spouse had a taxable income amounting to $9,517 meant that by force of sec. 159J(4) the taxpayer was not entitled to any rebate. The Commissioner's representative indicated that that was an argument upon which he did not seek to rely. However, in my view the reference has to be determined in accordance with the Act and the circumstance that the Commissioner has not relied upon a particular argument cannot preclude the Board from considering it and giving effect to it if appropriate.
9. In my view the question ultimately facing the Board is whether there is some circumstance touching the interpretation of the Act which would suggest that the Parliament in enacting subsec. (4) of sec. 159J intended the phrase ``year of income'' to be construed otherwise than as primarily defined in sec. 6. Such an alternative might be to construe the reference to ``year of income'' in subsec. (4) as if it were a reference to ``that part of the year of income during which the dependant was a dependant of the taxpayer and during which the taxpayer contributed to the maintenance of the dependant''. I find no basis for such an interpretation. Subsection (3) provides for situations in which the dependency qualification does not subsist throughout the year.
10. In my view the clear intent of the section is that:
- (a) the maximum rebate will only be allowable when the nexus of marriage subsisted throughout the year; contributions to maintenance continued throughout the year; the taxpayer and the dependant each were residents throughout the year; and the taxpayer was the only person during the year to contribute to the maintenance of the dependant; and
- (b) that in all other cases the maximum rebate allowable should be only such lesser sum as is ``reasonable in the circumstances''; but
- (c) that in either case if the separate net income derived by the dependant in the year of income exceeded $282 the rebate otherwise allowable would be reduced by $1 for every $4 by which the separate net income derived by the dependant in the year of income exceeds $282.
11. As the separate net income of the taxpayer's spouse did exceed $4,133 in the year of income, I would uphold the assessment of the Commissioner.
Claim disallowed
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